Thursday, April 03, 2008

Invest in a life annuity

Dear Mr. Tan,

I am 61 year old. I have around $100,000 to invest. I need your advise on a better investment compared to the low interest rate for fixed deposit.

I am thinking of putting the sum to a deferred anunity with NTUC Income. Am I able to withdraw the full amount from NTUC when I reach 65 years old. What are the likely return I will be getting in 4 year time?

I suggest that you call the business center of NTUC Income and ask them about the return on the deferred annuity.

Please read this FAQ


Anonymous said...

If you are considering investing in an annuity for 4 years i advise against it. The return is miserable.
You must as well put it into a Money market fund like the Flexicash offered by NTUC, which MAy give you more than 3%. It is very liquid, meaning you can withdraw any time without penalty. It is capital protected. This is the safest place on earth right now and also you can have a decent return. You can call it free lunch or have the cake and eat it or whatever you like if your concern is capital protection. But be careful, don't get locked up by other product, eg Growth, and be sorry. The agents will drool at the sight of your $100K. It means $2k for them in commission and meantime your money languishes in the lock up.


Thomas Phua's Blog said...

I have a client who kept asking me for past two years about Annuity for his father.

He has $100,000 and he has decided to place on annuity for his age 59 father to control his spending

He asked about Defered Annuity for various terms.

I had problem as he kept thinking each year he defered he gets couple of tens of $ more for the Annuity payment.

During the final session, I told him, you can delay for 5 years and get a slight higher annuity payment 5 years later, but that 5 years delay, you would have delayed $25,000 in total payments too.

Guess what, he signed up for his dad for an immediate annuity.

Generally when u defer the annuity payment you get a couple of tens of dollar more, but do not forget, each year of delay is also missing out on the immediate annuity payment of $5000+ a year.

If one has plan for an Annuity and at age 61, do an immediate Annuity than defered Annuity.

Start to enjoy the fruit of your annuity then delaying it.

- Thomas Phua

Anonymous said...

If buying an immediate is more advantageous than buying a deferred annuity, then why have deferred annuity in the first place. The loss is a lot.
Is it again another of ntuc strategies to trap unwary old people?
Perhaps, Mr. Tan would like to comment on Mr. Phua's claim.Which is better?

Anonymous said...

Zhummmeng, are you sure Flexicash is capital protected?

I remember some one did write that chance of price going down is not high, but no impossible.

Can you clarify on this as not to give wrong info?

Anonymous said...

Capital protected means a conservative investment strategy with capital preservation as its main objective as opposed to capital guaranteed which the issuer or another party guarantees the capital.
Money market are short term financial products like T-bills, CDs, Sibors,saving accounts , FDs etc. They are so safe and have potential for decent upsides.
Flexicash may have some short term bonds too.The current low interest rate may be a boon to flexicash.

Caveat; you said you are looking for short term safe haven with some upside and liquidity, this is the place.


Anonymous said...

There is no loss, except that when you start an immediate annuity, you draw on the annuity payment immediate on the following month.

Example, for $100k, if immediate annuity, at $420 a month, is about $5000 a year drawn.

If you start 5 years later, it may start at $480 a month, but immediate annuity would have drawn on the first 5 years already, it is not a matter strategic trap.

Income and HSBC offers participating annuity, in that annuity will increase with bonus over the years.

I hope not all topics discussed will invite such suspicions on insurers. It is sad that the blog has led to people thinking all subjects discussed has an element of trap.

I enjoyed reading some of the postings as well, but such suspicion is not worth for me to share my views in future.

I may not write any further.

Thank you very much for those who are now ready to pounce on this comment.

Thank you and I shall not be contributing any further on this topic.

- Thomas Phua

Anonymous said...

Mr. Phua, you are getting paranoid. Questioning is not attacking. It is asking for further info.
In your line of work you may call
it objection.For you, it should be overcoming objection, right? And not attacking, right? but you seem to suffer from paranoia , like one poster whining and behaving like some spoilt crybaby, cannot take criticism.
To ask the question again.
If immediate is so good as you have shown why insurers have deferred ones? There must be a catch, right?
Who should buy immediate and who should buy deferred?
I hope this question isn't intimidating, and don't worry ,it is not loaded.

Anonymous said...

I am sure there are pros and cons for both immediate and deferred annuities. It depends on the needs and requirements of the individuals.


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